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Market Tracker has conducted research to examine the current trends in UK public M&A for the period 1 January 2022 to 31 March 2022.

Background and approach

Market Tracker has conducted research to examine the current trends in respect of UK public M&A. Data for this report has been sourced from the Market Tracker transaction data analysis tool which allows users to access, analyse and compare the specific features of numerous corporate transactions. This is an update to our Market Tracker Trend Report: Trends in UK Public M&A 2021 in which we examined firm and possible offers announced in 2021.

For the purposes of this update we analysed the period between 1 January 2022 to 31 March 2022 (Q1 2022). While comparisons have been made to the corresponding period in 2021 (1 January 2021 to 31 March 2021) and with the preceding quarter (1 October 2021 to 31 December 2021), definitive conclusions can only be made on the completion of the full year trend report of 2022.

We reviewed a total of 27 transactions that were subject to the Takeover Code (Code): 12 firm offers (nine for Main Market companies and three for AIM companies), 12 possible offers (eight for Main Market companies and four for AIM companies) and three formal sale processes (FSPs) (one by a Main Market company and two by AIM companies).

The percentages included in this report have been rounded up or down to whole numbers, as appropriate. Accordingly, the percentages may not in aggregate add up to 100%. Deal values have been rounded to the nearest million (where expressed in millions) and have been rounded to the nearest hundred million (where expressed in billions).

The final date for inclusion of developments in this report is 31 March 2022. Reference has been made to deal developments after this date if considered noteworthy.

Deal highlights

Deal volumes remained robust in Q1 2022, but there was a marked decline in the number of high value transactions, particularly when compared with Q3 2021. Key highlights from this report include:

• 12 firm offers (Q1 2021: 9 firm offers; Q4 2021: 13 firm offers)
• £4.6bn aggregate deal value (Q1 2021: £7.7bn; Q4 2021: £10.7bn)
• £385m average deal value (Q1 2021: £859m; Q4 2021: £829)
• One £1bn plus transaction announced
• 8 (67%) of firm offers were structured as schemes and 4 (33%) were structured as offers
• 33% of firm offers were public to private (P2P) transactions
• Overseas bidders were involved in 67% of firm offers announced, including the £1.6²ú²Ô offer for Brewin Dolphin

Deal volume and deal value

Deal volumes remained robust in Q1 2022 with 12 firm offers (Q1 2021: 9; Q4 2021: 12). 

However, there was a more pronounced decline in deal values during Q1 2022 with an aggregate deal value of £4.6bn and average deal value of £385m. This represents a 57% decrease in aggregate deal value compared to Q4 2021 and an 88% decrease in aggregate deal value compared to Q3 2021, which saw a staggering aggregate deal value of £37.1bn.

The largest transaction announced was the £1.6²ú²Ô offer for Brewin Dolphin Holdings by Royal Bank of Canada, the only £1bn plus transaction announced during Q1 2022. By contrast 2021 saw 20 £1bn M&A transactions.

Deal structure

Schemes of arrangement remained the structure of choice among bidders during Q1 2022. Of the 12 firm offers announced, eight (67%) were structured as schemes of arrangement and four (33%) were structured as offers.

The four transactions structured as offers were:

• Corporation Financiere Europeenne (CFE)’s £33m offer for CIP Merchant Capital (CIP)
• Tibergest PTE’s (a company wholly-owned by Mr Serge Crasnianski) £285³¾ offer for Photo-Me International
• Franchise Brands’ £49³¾ offer for Filta Group Holdings
• DWS Infrastructure’s £595 offer for Stagecoach Group

Where a transaction was structured as an offer, there were usually compelling circumstances for this. For example, both the CIP/CFE and Photo-Me/Tibergest offers were hostile offers triggered by the bidder having a large pre-existing shareholding in the target company resulting in a mandatory offer and the Stagecoach/DWS offer was made against the backdrop of a competing offer for Stagecoach by National Express. 

Public to private transactions

Public to private transactions (P2P) was the story of the year in 2021. In our 2021 public M&A trend report we noted that 34 (64%) of the 53 firm offers announced were P2P transactions made by bidcos backed by private equity, financial investors and/or individuals/family offices who spent, in aggregate, £41.1bn snapping up UK public companies. In Q1 2022, four (33%) of the 12 firm offers announced were made by private equity, financial investors and/or individuals with an aggregate deal value of £964m. This was a 43% decrease in comparison to Q4 2021 during which seven (54%) of the 13 firm offers were P2P transactions and Q1 2021 during which seven (78%) of the nine firm offers announced were P2P transactions.

The two hostile bids announced in Q1 2022 were both P2P transactions:

• the £33m offer for CIP Merchant Capital by Corporation Financiere Europeenne. (CFE)—this was triggered by CFE acquiring shares representing 31% of CIP’s share capital from a single shareholder
• the £285³¾ offer for Photo-Me International by Tibergest PTE (a company wholly-owned by Mr Serge Crasnianski)—this was triggered by Photo-Me’s CEO and deputy chairman, Mr Serge Crasnianski, acquiring 36.5% of Photo-Me’s share capital from a single shareholder, the David Dan Foundation (see: Photo-Me unimpressed by CEO’s discounted mandatory takeover bid)

The remaining P2P transactions announced in Q1 2022 were:

• the £595³¾ offer for Stagecoach Group by DWS Infrastructure
• the £53.7m offer for Tungsten Corporation offer by Kofax Holdings International

2021 saw an unprecedented raid on UK-listed companies in particular by cash-rich private equity backed bidders (see: Private equity pounces on UK companies in recent takeover bids). This was mainly being driven by the competitive prices of UK companies compared with other markets. The private equity industry was a clear winner from the economic disruptions created by the global pandemic, striking larger and more frequent deals and creating a shift in the UK economy. A growing proportion of the economy has been shifted into private hands as opposed to being dominated by the public markets.

Despite the optimistic forecast that P2P transactions would increasingly account for a significant portion of UK public M&A activity, the volume of P2P firm offers has steadily decreased each quarter since Q1 2021, ending with 33% in Q1 2022, significantly lower than any other quarter in the last year.

Some commentators had attributed the increase in P2P transactions to depressed valuations of UK companies and low interest rates. Rising interest rates combined with robust share prices may be the cause of the decrease in the proportion of P2P transactions. However, some caution should be exercised in drawing conclusions given the limited period covered in this report.

Consideration structure and bid financing

Of the 12 firm offers announced in Q1 2022:

• 7 (58%) were cash only offers
• 3 (25%) were cash and share offers
• 2 (17%) were shares only offers

Cash remained king with 10 (83%) of the 12 firm offers announced in Q1 2022 involving a cash element and it was the exclusive form of consideration in 58% of deals.

This is not markedly different to Q4 2021, when 11 (85%) out of 13 firm offers announced involved a cash element and it was the exclusive form of consideration on 77% of firm offers announced during the period.

Of the 10 firm offers that involved a cash consideration element:

• six were funded solely by existing cash resources
• two were funded by a combination of debt finance and existing cash resources
• one was funded solely by debt finance
• one was funded solely by equity subscriptions to bidco/PE funds

Industry sector

M&A activity was spread across a range of industry sectors in Q1 2022, with the most active sectors being Support Services (25%), Travel, Hospitality, Leisure & Tourism (25%), Financial Services (17%) and Consumer Products (17%).

The largest transaction in Q1 2022 was in the Financial Services sector. Investment management company Brewin Dolphin Holdings plc received a £1.6²ú²Ô offer from global financial services company, Royal Bank of Canada.

One of the largest transactions in 2021 was the £3.5bn takeover bid for private jet services company, Signature Aviation, by Blackstone, Global Infrastructure Partners and Cascade in 2021. Q1 2022 saw two transactions in the aviation services sector:

• the £571³¾ offer for airline services provider John Menzies by Kuwait-based rival National Aviation Services, a subsidiary of Agility Public Warehousing Company
• the  Â£85³¾ offer for Air Partner by Wheels Up, a start-up aviation business which went public in 2021 through a merger with a US SPAC

National Aviation Services’ offer for John Menzies was initially hostile after the board of John Menzies rejected two preliminary approaches on the basis that they undervalued the company (see: John Menzies continuously rejects Kuwait rival’s ‘opportunistic’ takeover bid). However, after received receiving a third and final revised proposal, Menzies provided its unanimous recommendation to shareholders.

Bidder jurisdiction

Overseas bidders were involved in 67% of all firm offers announced in Q1 2022. Of the 12 firm offers announced:

• four (33%) were made by UK bidders
• three (25%) were made by US bidders
• one (8%) was made by a Canadian bidder
• one (8%) was made by a German bidder
• one (8%) was made by a Luxembourg bidder
• one (8%) was made by a Kuwait bidder
• one (8%) was made by a French bidder*

* For the purpose of this report we are treating Tibergest PTE Ltd as French as the bidco is wholly-owned by French national, Serge Crasnianski

The aggregate deal value for all firms involving overseas bidders was £4.2bn, which represents 91% of the aggregate deal value in Q1 2022. This is similar to Q1 2021 during which the aggregate deal value for all firms offers involving overseas bidders was £7.6bn, which represented 98% of the aggregate deal value in Q1 2021. A US bidder was involved in the single £1bn plus transaction in Q1 2022.

Hostile and competing offers

Two of the firm offers announced in Q1 2022 were hostile from the outset. These were Serge Crasnianski’s £285³¾ offer for Photo-Me International and Corporation Financiere Europeenne’s (CFE) £33m offer for CIP Merchant Capital. Both bidders held significant stakes in the target company, with Serge Crasnianski and persons acting in concert holding 36.5% of the issued share capital of Photo-Me, and CFE holding 31.8% of the issued share capital of CIP. The CFE offer for CIP become unconditional on 1 April 2022 after satisfying the acceptance condition however, Crasnianski’s offer for Photo-Me lapsed after receiving insufficient acceptances.

Only one company was subject to an actual competing offer in Q1 2022:

Stagecoach Group had already announced a £481m recommended all-share merger with National Express on 14 December 2021. However, The Competition and Markets Authority (CMA) issued an interim enforcement order (IEO) in relation to the National Express offer in January 2022 which prevents the transaction from completing until the CMA has completed its own investigation into the Stagecoach/National Express proposed merger. Shortly after the IEO was issued Stagecoach received a higher £595³¾ competing offer from German asset manager, DWS Infrastructure. Accordingly, the Stagecoach directors unanimously withdrew their recommendation of the National Express offer in favour of the DWS offer which was recommended at outset.

In addition to the actual competing offer, three companies were the subject of potential competing offers:

• River and Mercantile Group was the subject of a £99³¾ firm offer by AssetCo and possible offer by Premier Miton Group, which is now terminated
• Tungsten Corporation was the subject of a £54³¾ firm offer by Kofax Holdings International and possible offers by Pagero Group (ongoing), Jaggaer (terminated) and Accel-KKR (terminated)
• McKay Securities was the subject of a £272³¾ firm offer by Workspace Group and a possible offer by Slate Asset Management (terminated)

Deal in focus: John Menzies plc

• John Menzies (Menzies) announces that it has received a preliminary and unsolicited proposal from National Aviation Services Holding for Company's Business Management (Holdco) S.P.C. (NAS), a subsidiary of Agility Public Warehousing Co (Agility), to acquire the entire and to be issued share capital of Menzies at a price of £5.10 per Menzies share in cash. The board rejects the proposal concluding that the proposal is entirely opportunistic, conditional and that the terms fundamentally undervalue Menzies and its future prospects
  
  
• NAS announces that it has again requested information access and dialogue with Menzies' management and reiterated its belief that its possible cash offer for Menzies at a price of £5.10 per share represents a full and fair value for Menzies
  
  
• Menzies announces that it has engaged with its shareholders following the approach from NAS and once again, the board unanimously rejects the NAS proposal
  
  
• NAS announces that following discussions with a number of Menzies' shareholders, NAS has entered into contracts to purchase 12.1m ordinary shares in Menzies, representing approximately 13.2% of the issued share capital of Menzies, at a price of £6.05 per share
  
  
• NAS announces that it has acquired a further 5.3m shares, representing approximately 5.8% of the issued share capital of Menzies, at a price of £6.05 per share
  
  
• Menzies announces that it has received a final revised proposal from NAS, a subsidiary of Agility, regarding a possible all cash offer for Menzies at a price of £6.08 per share. The board indicates to NAS that it would be willing to recommend an offer to Menzies shareholders
  
  
• Menzies announces that it has received consent from the Takeover Panel for its requested extension of the ‘put-up or shut-up’ deadline to 30 March 2022
  
  
• The boards of GIL International Holdings V Limited (Bidco), a wholly-owned subsidiary of Agility, and Menzies announce that they have reached agreement on the terms and conditions of a recommended cash offer to be made by Bidco for the entire issued and to be issued ordinary share capital of Menzies not already owned by Bidco. The offer values Menzies at £571³¾ and is intended to be implemented by way of a scheme of arrangement.

Possible offers and FSPs/strategic reviews

There were 12 possible offers announced in Q1 2022. This compares with 12 possible offers (in relation to eight targets) in Q4 2021 and 13 possible offers (in relation to 12 targets) in Q1 2021.

Of these possible offers, two progressed to firm offers, two terminated, and eight were ongoing as at 31 March 2022.

In addition to the 12 possible offers, there were three FSPs/strategic reviews announced (H1 2021: two FSPs, Q3 2020: three FSPs) during Q1 2022, two of which were by AIM-quoted companies and one by a Main Market company:

• Allied Minds launched its FSP in response to a low company valuation
• ADVFN launched its FSP due to concerns over announcements of significant
• shareholdings and that control may be being sought by long-standing group of shareholders whose total interests may not be aligned with shareholders as a whole
• Angus Energy launched its FSP as a result of a valuation mis-match

Allied Mind’s and Angus Energy’s FSPs were ongoing as at 31 March 2022*. However, ADVFN’s FSP terminated during the review period.

*Angus Energy announced the termination of its FSP on 8 April 2022.

Legal and regulatory developments

PCP 2021/1: Miscellaneous Code Amendments

As reported in our 2021 Public M&A Trend Report, the Takeover Panel (Panel) published a consultation paper, PCP 2021/1, which proposed amendments to the Takeover Code (Code) in the following areas:

• the requirement for a potential offeror to disclose an obligation to offer a minimum level, or particular form, of consideration
• a restriction on acquisitions of interests in shares by a mandatory offeror at the end of the offer timetable
• the ‘look-back period’ for determining the price of a mandatory offer
• the ‘chain principle’ in the context of a mandatory offer
• restrictions following the lapsing of an offer or a statement of no intention to bid
• other minor issues

The Panel had been expected to publish a response statement in Spring 2022, but this had not been published as at the date of this report. As reported in (a subscription to Lexis®PSL Corporate is required), a Joint Working Party of the Company Law Committees of the City of London Law Society and the Law Society of England and Wales has raised some concerns regarding some of the proposals in PCP 2021/1, namely:

• the proposal to require a potential offeror to announce at the start of the offer period any minimum level, or particular form, of consideration required
• the proposed restrictions on a mandatory offeror acquiring offeree shares during the later stages of the offer timetable
• the proposed extension of the chain principle under Rule 9 of the Code.

Takeover Panel consults on the removal of restriction on anonymous order book dealings

On 7 February 2022, the Panel published a public consultation paper, PCP 2022/1, which proposed the removal of the restriction in Rule 4.2(b) of the Code on an offeror purchasing shares in the offeree through an anonymous order book system. The Panel also proposed consequential changes to Rule 38.2 of the Code, which restricts dealings between offerors and connected exempt principal traders. The closing date for the consultation was 18 March 2022 and the Panel said it intended to publish its response statement at the same time as the response statement to PCP 2021/1.

For further details, see: (a subscription to Lexis®PSL Corporate is required).

Takeover Panel updates Practice Statement 20

On 9 February 2022, the Panel updated Practice Statement 20 (Rule 2—Secrecy, possible offer announcements and pre-announcement responsibilities), which deals with the obligation under Rule 2.2 of the Code to make an announcement where an offeree is the subject of rumour or speculation or there is an untoward movement in its share price.

For further details, see: (a subscription to Lexis®PSL Corporate is required).

Takeover Panel publishes new and revised notes to advisers

On 25 March 2022, the Panel released two new notes to advisers, one on the disclosure of information on Rule 9 of the Code and the other on Rule 2.8 statements. It has also updated its note to advisers on re-registering a public company as a private company.

For further details, see: (a subscription to Lexis®PSL Corporate is required).

Firm offers included in this report

* Tibergest PTE Ltd is incorporated in Singapore however the bidco is wholly-owned by French national, Serge Crasnianski

Further reading

• Private equity pounces on UK companies in recent takeover bids
• John Menzies continuously rejects Kuwait rival’s ‘opportunistic’ takeover bid
• Photo-Me unimpressed by CEO’s discounted mandatory takeover bid
• Market Tracker trend report—trends in UK public M&A in 2021
• Takeover approach for Oxford Instruments from rival Spectris sends shares surging
• Spectris terminates takeover bid for Oxford Instruments due to Ukraine conflict
• Playtech CEO teams up with TTB to bid for control
• M&C Saatchi snubs initial reverse takeover approach from tech magnate Vin Murria
• Market Tracker Trend Report: Trends in Public M&A in Q1 2021